Video: Steven Levitt analyzes drug dealing economics

In this 2004 video, Steven Levitt presents analysis of drug dealing economics.

Steven Levit is the author of Freakonomics. Drug dealing is not as lucrative as some people might think, or as what is portrayed in the movies. It turns out that the lowest tier drug dealer makes the equivalent of $3.50 per hour — this is lower than the minimum age — which is why some drug dealer have to work part-time at McDonalds.

Worse than that is that it is a dangerous profession, with the chances of being killed on the same ballpark as that of soldiers in a war zone. Inner city drug dealers has about a 25% chance of getting killed over a four-year period.

In the video he compares the organization of drug gangs to that of the organization of McDonald’s where there are different tiers, levels, and hierarchy. Unlike the low-tier drug dealer, drug gang leaders (equivalent to that of a McDonald’s franchisee owner), however can make substantial amount of money — about $100,000 a year.

The video does have some humor injected into it by the presenter.